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Cristian Garner
Cristian Garner

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Bitcoin: A Peer-to-Peer Electronic Cash System


This is a summary of the Bitcoin White paper, You can read the full paper here:

The Bitcoin White paper was published the 31 October of 2008 by Satoshi Nakamoto. No one knows the real identity of Satoshi Nakamoto.

Bitcoin was created to disrupt online transactions and internet commerce which used to require a trust-based model and relies on financial institutions to prevent double-spending. Relying on centralized organizations has severe problems such as censorship, chargebacks, and complexity that increase transaction costs.

Paying with cash solves the double-spending problem in the physical world, for the digital world it's needed a Blockchain. Bitcoin's blockchain uses hashes to create a connected data structure which saves the owner of a coin using the private key as proof of ownership. To be secure uses a peer to peer timestamp server that requires a generated computational proof, malicious actors would need to collectively control more CPU power than the rest of the actors. To change previous transactions is needed to use the same amount of CPU power to rewrite all previous transactions until the end of the chain making it almost impossible to hack the network.

Depending on the size of the network the proof of work difficulty increases or reduces.

There are a set of rules to run the network, the goal is to validate transactions in a block and add it to the chain by nodes, the longest chain will be always considered by the nodes and if two different chains are equally long a temporal branch will be created until one is longer. As incentive users earn new coins generated on each block and a transaction fee. Once a certain amount of coins are created no new coins will be created and the incentive will be the transaction fee.

In conclusion, Bitcoin is a cryptocurrency created by a set of technologies, it creates and stores value in an anonymous and trustless way. The technology behind it, the Blockchain can be used for different purposes including the creation of decentralized Apps, perfect for systems that need trust.

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